The Japanese economy has gone through drastic changes in the past sixty years. After the Second Sino-Japanese War, when the Japanese nation was defeated by the Americans and the nation was occupied by the American military many changes took place in the Japanese economy; it was opened up to foreign investors, so foreign FDI was now allowed in the country with minimal interference by the government. The currency was revalued making merchandise from Japan less practical, as it got too expensive for other countries. The Japanese economy flourished during the 1980s and an economic bubble was formed; by the late 1980s housing in Japan was the most expensive in the world and the Japanese stock market was booming. Then in 1991 when the economic bubble finally burst with drastic consequences, many companies, banks and other institutions went broke, stock and land prices plummeted in value, and millions of people lost their jobs. The government implemented rescue packages to try and salvage the economy but with little success.Efforts have been made for two decades to get Japan out of the economic slump, and get the economy running as it used to with a double digit economic growth rate, but the fact is it’s only around 1 percent after the bursting of the bubble. Ever since the government and banks have been struggling, to try to get the economy back on track. Changing policies and rising fiscal deficits characterize the economy today, moreover, LDP the leading political party for over fifty years has lost its power over the Diet and DPJ have the current majority, getting an unprecedented majority of representatives. Cutting ties with the keiretsu affiliation and taking up a more western type of commerce, the Japanese are saving money and changing the set up of the companies, making them more efficient and more competitive. The economic outlook of the country continues to spark debate, the Japanese are hard workers and with the correct measures they ought to be able to overcome this rough patch they are going through.